The client also has to know the requirements of this kind of credit, and they also have to realize why it is better than the QM loans in cases of inadequate finances.
For a client to find the right loan that does not meet the standards set by the government, one has to consider the following:
- Why does the client need this type of lend? Are they in a bad financial situation?
- How urgent is the loan needed and how long is the waiting period?
- The requirements that qualify the customer for the loan
Which is the right non-QM loan for you?
The right non-QM loan for a client is one that:
- Does not have excessive upfront and fees. The upfront fee is the fee that is charged to the borrower by a lender. This fee should not go beyond 3% of the total amount that is borrowed by the customer.
- Has no loan features that are unfavorable: Loans that are not only for interest, loans with no negative amortization and no balloon loans.
- The limits on debt-to-income ratios. A loan that does not require DTI ratio of more than 43%
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Types of Non-QM loans
A customer ought to know the different varieties of Non-QM loans that are present in the market today. Some of the main types of these loans are:
- Stated income-this one does not require a fully documented income prove, but a good employment history is enough to qualify you for credit.
- Interest only loans.
- Higher debt to income ratios. Non-QM loans have a DTI of 43% or even more.
- 40-year loan term. A mortgage with over a 30-year term qualifies as a Non-QM loan
The advantages of non-QM loans
A customer who needs a non-QM loan has to know the benefits that are associated with these loans. The following are some of these benefits:
- It is not mandatory for a borrower to meet the minimum compulsory waiting period after bankruptcy since they can get a Non-QM loan.
- The Non-QM loans do not have a waiting period.
- One can get a loan when they are bankrupt or face foreclosure.
Interest only loans are the most commonly available loan in the market today as they are favorable for borrowers with an income that is irregular.
The customers should know that they can pay interest only on their initial loan and later make a more substantial payment using the principle.
Though the qualifications for a non-QM loan is fair, it is imperative to know that the clients still need to provide some evidence of income.
Home buyers can become homeowners through QM loans and later can refinance after they qualify for the QM loans. Further, customers must be informed that if they do not meet the guidelines for QM loans, they can still be eligible for a mortgage with a non-QM loan with no period of waiting.
These loans offer 43% DTI with factors of compensation. Due to the rise in house prices, many buyers can miss the opportunity to buy a house. However, through the existence of non-qualified loan, the buyer can now get a mortgage home without meeting the required QM qualifications.